According to the union government's regulation, an Indian citizen cannot trade in physical share certificates anymore. The investor will have to convert the physical share certificates into a dematerialized (Demat) format, or an electronic format. The Securities and Exchange Board of India (SEBI) has notified that earlier. This will help the investors to ease the procedure of buying, selling, and transferring the shares of a company. There are the steps listed, how to convert the physical shares into a Demat account.
How to request?
The first step convert the physical shares into a Demat form is to open a Demat account. (You can know from here how to open a Demat account.)
The investor needs to contact the depository participant (DP) for a Dematerialization Request Form (DRF).
Then the investor needs to accurately fill up the DRF with the required details and affix his/her signature.
After filling up the DRF, forward the same along with the physical share certificates to the DP.
While forwarding the DRF, the investor will have to mention 'Surrendered for Dematerialization' on the physical share certificates.
Only after the investor will surrendered the physical share certificates for dematerialization, the DP will start processing the request.
Then the request will be sent by your DP to the company's appointed Registrar and Share Transfer Agent (RTA).
After this, the dematerialization request will be approved, and the physical share certificates will be destroyed. Along with this, the investor's Demat account will be credited with an accurate number of shares.
Why is a Demat account important?
Demat accounts are accepted largely now because of their easy access and better security. The Demat account is safer as it is unfeasible to forge or fake dematerialized shares. Then you can place a request for conversion of the physical share certificate into a dematerialized format. With e-certificates you can check all the status and positions online, and it is a transparent way for the government to track all the shares, obtained by an investor. Now, multiple Dps offer to open a Demat without any cost.